Target capital structure impacts the WACC used for a target company.

Think through this statement and identify and discuss the challenges and implications.

When working through a potential target purchase, a team member contends that a firm should use historical or book weights when estimating the firms WACC because they are easily observable and can guide the estimation process. Provide a counter argument for a rapidly growing firm that raises large amounts of external capital. Would the answer change for a well-established firm that does not expect to raise capital?